Devon Energy Prod. Co. v. Enplat II, LLC

• Decision Date: 23 January 2023
• Docket Number: 08-21-00217-CV
• Court: Texas Court of Appeals
• Parties: DEVON ENERGY PRODUCTION COMPANY, LP, EASTLAND OIL CO., SPINNAKER INVESTMENTS, LP, CALLON (PERMIAN) LLC f/k/a CARRIZO (PERMIAN) LLC, TILDEN CAPITAL MINERALS, LLC, PEGASUS RESOURCES, LLC, THE WOODLANDS VENTURE CAPITAL COMPANY, MAP2009-OK, JOURNEY OIL & GAS, INC., EASCO, LLC, TERRY JENNINGS, as Trustee of the TJS TRUST, WALKER ROYALTY, LP, BEVERLY GAY NICHOLS, GREGORY P. MILLER, BOYD D. McMILLAN and DELFINA L. McMILLAN, Appellants, v. ENPLAT II, LLC, PLATFORM II, LLC and SIMMONS BANK f/k/a SOUTHWEST BANK, MANAGEMENT, Appellees.

DEVON ENERGY PRODUCTION COMPANY, LP, EASTLAND OIL CO., SPINNAKER INVESTMENTS, LP, CALLON (PERMIAN) LLC f/k/a CARRIZO (PERMIAN) LLC, TILDEN CAPITAL MINERALS, LLC, PEGASUS RESOURCES, LLC, THE WOODLANDS VENTURE CAPITAL COMPANY, MAP2009-OK, JOURNEY OIL & GAS, INC., EASCO, LLC, TERRY JENNINGS, as Trustee of the TJS TRUST, WALKER ROYALTY, LP, BEVERLY GAY NICHOLS, GREGORY P. MILLER, BOYD D. McMILLAN and DELFINA L. McMILLAN, Appellants,
v.
ENPLAT II, LLC, PLATFORM II, LLC and SIMMONS BANK f/k/a SOUTHWEST BANK, MANAGEMENT, Appellees.

No. 08-21-00217-CV

Court of Appeals of Texas, Eighth District, El Paso

January 23, 2023

Appeal from the 143rd Judicial District Court of Reeves County, Texas (TC# 17-05-21958-CVR)

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Before Rodriguez, C.J., Soto, J., and Marion, C.J. (Ret.) Marion, C.J. (Ret.) sitting by assignment

OPINION

LISA J. SOTO, Justice.

In this appeal, we are asked to construe the terms of a 1940 deed to determine whether the grantors reserved a 1/16th fixed royalty interest or a 1/16th non-executive mineral interest when conveying a particular tract of property. Appellants argue the trial court erred in finding that the grantors intended to reserve a royalty interest and that the grantors' intent was to instead reserve a mineral interest. We agree and reverse the trial court's order granting Appellees' summary judgment motion and remand for further proceedings.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. The 1940 Deed

In October 1940, Rosa Thomason Harris and J.M. Harris (the Harris Grantors), conveyed to John Lopoo (Lopoo) their interests in Sections 37, 39, 40 and 65, Block 4, in Reeves County, Texas (the Property), subject to the reservation language below. Through a series of conveyances, Appellants (collectively Devon Energy) obtained all of Lopoo's interests, and Appellees (collectively Enplat II) obtained all of the Harris Grantors' interests.

However, this conveyance is made with the express understanding that there is reserved to the Grantors, their heirs and assigns an undivided one-sixteenth (1/16) of any and all oil, gas or other mineral produced on or from under the land above described. John Lopoo [Grantee], or his heirs and assigns shall have the right to lease said land for mineral development without the joinder of Grantors or their heirs and assigns, and to keep all bonus money, as well as all delay rentals, but when, if and as Oil, Gas or other mineral is produced from said land, one-sixteenth (1/16) of same, or the value thereof, shall be the property of Grantors, their heirs and assigns.^[1]

The Property is currently subject to an oil and gas lease containing a 1/5th royalty rate (the MAP lease). Prior to 2017, Lopoo's successors-in-interest treated the 1940 deed as reserving a 1/16th non-executive mineral interest in the Property and therefore credited the Harris Grantors'

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successors-in-interest with owning 1/16th of 1/5th of all minerals produced on the Property. The Harris Grantors' successors-in-intereste were thus paid a 1/80th royalty in the production.

In 2017, Enplat II acquired title to 2/3 of the Harris Grantors' reservation. By letter dated March 9, 2017, Enplat II contacted Devon Energy to dispute the parties' prior interpretation of the deed, claiming that it reserved a fixed 1/16th royalty interest in all minerals produced from the Property rather than a 1/16th mineral interest. Enplat II sought a royalty interest five times the amount the Harris Grantors' successors-in-interest had been receiving. When Devon Energy disputed this deed interpretation, Enplat II sought a declaratory judgment that the 1940 deed reserved a fixed 1/16th royalty interest in the Property. Simmons Bank, which owns the remaining 1/3 interest in the reservation, was brought into the suit as an involuntary plaintiff. Devon Energy filed a counterclaim seeking a declaratory judgment construing the 1940 Deed as reserving a 1/16th non-executive mineral interest. Both parties sought an award of attorney's fees.

The parties thereafter filed competing motions for summary judgment, each seeking a declaratory judgment interpreting the deed in its favor. Following a hearing, the trial court issued a final judgment denying Devon Energy's motion for summary judgment and granting Enplat II's motion, interpreting the deed to contain a reservation of a fixed 1/16th royalty interest rather than a 1/16th mineral interest. The court further ordered each party to bear its own costs and attorney's fees. Devon Energy appeals, raising the sole issue of whether the trial court's interpretation of the deed was legally correct.^[2]

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II. STANDARD OF REVIEW

When a trial court renders a declaratory judgment through summary judgment proceedings, we review the "propriety of the trial court's declarations under the same standards we apply to summary judgment." See Twin Creeks Golf Group, L.P. v. Sunset Ridge Owners Ass'n, Inc., 537 S.W.3d 535, 539 (Tex. App.-Austin 2017, no pet.) (citing Hawkins v. El Paso First Health Plans, Inc., 214 S.W.3d 709, 719 (Tex. App.-Austin 2007, pet. denied)). We review the grant of a motion for summary judgment de novo. See Merriman v. XTO Energy, Inc., 407 S.W.3d 244, 248 (Tex. 2013). When opposing parties file cross-motions moving for summary judgment on the same issues and the trial court grants one motion and denies the other, we consider the summary judgment evidence presented by both sides, determine all questions of law presented, and if we determine that the trial court erred, we render the judgment the trial court should have rendered. Id. at 248. Here, the parties have not raised any factual disputes; the only issue is whether the trial court correctly construed the terms of the 1940 deed. See Luckel v. White, 819 S.W.2d 459, 461 (Tex. 1991); see also Greer v. Shook, 503 S.W.3d 571, 582 (Tex. App.-El Paso 2016, pet. denied) (issue on appeal involving deed construction raised question of law that we review de novo) (citing Anadarko Petroleum Corp. v. Thompson, 94 S.W.3d 550, 554 (Tex. 2002)).

When conducting our review, we apply our own judgment without deference to the trial court's decision. See WTX Fund, LLC v. Brown, 595 S.W.3d 285, 293 (Tex. App.-El Paso 2020, pet. denied) (citing Quick v. City of Austin, 7 S.W.3d 109, 116 (Tex. 1998)). Our primary duty is to ascertain the intent of the parties from the four corners of the instrument. Wenske v. Ealy, 521 S.W.3d 791, 794 (Tex. 2017); see also Canter v. Lindsey, 575 S.W.2d 331, 334-35 (Tex. App.- El Paso 1978, writ ref'd n.r.e.). We use a holistic approach in determining the parties' intent, and we therefore must examine the entire instrument seeking to harmonize and give effect to all its provisions such that no provision is rendered meaningless. See Piranha Partners v. Neuhoff,

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596 S.W.3d 740, 746-49 (Tex. 2020) (citing Luckel, 819 S.W.2d at 462; Altman v. Blake, 712 S.W.2d 117, 118 (Tex. 1986)). In discerning the parties' intent, "words and phrases must be construed together and in context, not in isolation." Hysaw v. Dawkins, 483 S.W.3d 1, 13 (Tex. 2016) (citing Plainsman Trading Co. v. Crews, 898 S.W.2d 786, 789 (Tex. 1995)). Words and phrases generally bear their ordinary meaning unless the context supports a technical meaning or a different understanding. Id. at 13 (citing In re Office of the Att'y Gen. of Texas, 456 S.W.3d 153, 155-56 (Tex. 2015)). Similarly, apparent inconsistencies or contradictions must be harmonized, to the extent possible, by construing the document as a whole. Id. (citing Luckel, 819 S.W.2d at 462).

III. ANALYSIS

On appeal, Devon Energy contends the trial court erred in characterizing the reservation as a royalty interest, and that instead, the Harris Grantors conveyed 15/16th of their mineral estate to Lopoo, while reserving a 1/16th mineral estate shorn of the executive interest to lease and to receive bonuses and delay rentals. Enplat II, on the other hand, contends the trial court correctly concluded that the Harris Grantors conveyed their entire mineral estate to Lopoo, while reserving a fixed 1/16th royalty interest. As set forth above, we must examine the deed in its entirety to determine which interpretation is accurate.

1. Lack of the term "royalty" in the deed

As a preliminary matter, we address Devon Energy's argument that the reservation in the 1940 deed did not include the term "royalty," reflecting the Harris Grantors' deliberate intent to reserve a mineral interest rather than a royalty interest. Although we agree with Devon Energy that the inclusion or absence of the term "royalty" can be a factor in determining a grantor's intent, it is not dispositive. See Temple-Inland Forest Products Corp. v. Henderson Family Partnership, 958 S.W.2d 183, 185 (Tex. 1997). If we determine the language described a royalty interest without using the word royalty, we may still find that the Harris Grantors intended to reserve such

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an interest. See, e.g., Pinchback v. Gulf Oil Corp., 242 S.W.2d 242, 243 (Tex. App.-Beaumont 1951, writ ref'd n.r.e.) (finding that deed created a royalty interest despite the failure to use the term "royalty").

2. The initial reservation clause: a cost-bearing mineral interest or a cost-free royalty interest?

We start with the first phrase in the reservation, which provides that the Harris Grantors were reserving an "undivided one-sixteenth (1/16) of any and all oil, gas or other mineral produced on or from under the land above described." Pointing to various cases interpreting similarly-worded phrases, Devon Energy contends that this phrase was intended to convey a mineral interest. Devon Energy relies on the long-standing principle proclaimed by the Texas Supreme Court that a conveyance or reservation of a fractional interest in the oil, gas or other minerals "in and under" the property that "may be produced," refers to a mineral interest, rather than a royalty interest.^[3]See, e.g.,...